Orica tax victory adds traction to Bridgestone dispute

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Orica directors are expecting the explosives and consumer goods company to receive a boost to its cash flow this year after settling a 14-year dispute with the Tax Office.

The company had been fighting an assessment levied over a sale and leaseback agreement involving two plants at the company's Botany site. The plants are no longer in use.

The decision will interest shareholders in Bridgestone Australia, as the Adelaide-based tyre maker is also in dispute with the Tax Office over a sales and leaseback agreement more than 12 years old.

Bridgestone is facing a bill plus penalties of about $52 million, equivalent to one-third of shareholders' funds.

Orica chief executive Malcolm Broomhead yesterday said the Tax Office was expected to refund $45 million in cash "by September". Orica balances its books on September 30.

The $45 million would include interest on the tax overpayment, Mr Broomhead said. It would have no material effect on Orica's ability to frank dividends.

After allowing for variance adjustments, the refund will contribute $36 million to earnings. It will be a significant item.

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A company spokesman said the Orica case was similar to what is known as the Eastern Nitrogen case, which involved Pivot Fertilisers, now a subsidiary of Orica. The two sale and leaseback agreements were similar and Orica relied on the Eastern Nitrogen case as a precedent, the spokesman said.

Bridgestone Australia had also taken heart from the Eastern Nitrogen case, finance director Andrew Moffatt said earlier this year.

"There have been two other previous sale and leaseback transactions that have been as far as the High Court: Eastern Nitrogen and Metal Manufactures. In both of those cases, the taxpayer (the company) was successful," he said.

The Bridgestone case, to be heard in November, was similar, he said, but the Tax Office was examining differences.

"We have two precedent cases where the taxpayer has been successful. Our legal advice is, we have a very strong case.